India may face new US tariffs as New Delhi and Washington try to strike a trade deal, after the United States Trade Representative (USTR) determined that India and dozens of other economies failed to adequately block imports made using forced labor.
The proposed measure has attracted attention because it is not based on allegations that Indian exports are produced using forced labour. Rather, the US Trade Representative’s complaint is that India does not have an effective enough system to ban imports of goods manufactured using forced labor elsewhere in the world.
The move, announced on June 2, comes as the two countries negotiate the first tranche of a bilateral trade agreement (BTA) while also trying to overcome tariff disputes that emerged after US President Donald Trump unveiled his reciprocal tariff policy earlier this year.
What exactly did the US Trade Representative say?
The US Trade Representative concluded that the actions, policies and practices of 60 economies regarding the failure to effectively enforce and enforce a ban on imports made using forced labor are “unreasonable” and burden or restrict US trade.
India is among 54 economies that have failed, according to the Office of the US Trade Representative, to impose such a ban and implement it effectively. The list also includes countries such as China, Japan, Australia, Bangladesh, Saudi Arabia, Singapore, the United Kingdom, and the United Arab Emirates.
The US Trade Representative said the lack of effective restrictions allows products made with forced labor to enter international supply chains, creating unfair competition for companies that do not use such practices.
According to the agency, these failures undermine global efforts to eliminate forced labor, distort market conditions, reduce the profitability of companies that comply with labor standards and contribute to the circumvention of existing import restrictions.
“The failure of our most important trading partners to address the importation of goods made with forced labor is unacceptable. This creates a dynamic in which American workers are forced to compete globally on an unlevel playing field,” US Trade Representative Jamison Greer said in a statement.
The investigation began on March 12. The USTR said it reviewed testimony from nearly 60 witnesses and about 500 comments and rebuttals before issuing its findings.
It is not about Indian exports
One of the most important aspects of the USTR’s action is what it doesn’t say.
The investigation does not allege that Indian exports to the United States are produced using forced labor. It also does not accuse Indian manufacturers of using forced labor to gain commercial advantage.
Instead, the USTR’s concerns relate to India’s import control framework. According to trade policy experts, the US action focuses on whether India effectively prevents imports of goods produced using forced labor in third countries from entering its markets.
The Global Trade Research Initiative (GTRI) noted that the proposed tariffs are being considered even though the investigation is not based on allegations that Indian exports themselves are manufactured using forced labour.
What are the tariffs proposed by the United States?
Following his decision, the US Trade Representative proposed imposing additional duties on imports from the economies under investigation.
Countries that already maintain a ban on forced labor imports, have committed to introducing such a ban through a trade agreement, or have a partial implementation regime, may face an additional 10% tariff.
For all other economies, the proposed tariff rate is 12.5%.
India is among the countries the US Trade Representative says has failed to effectively enforce and enforce such a ban, potentially exposing its exports to the higher tariff category if the proposal is implemented.
The proposed fees would apply broadly across products. However, the USTR also proposed a separate mechanism for textiles under which a specified volume of apparel and textile imports could enter the United States at a lower tariff rate.
The proposal is currently in the consultation stage. Requests to participate in the hearings must be submitted by June 22, written comments are due by July 6, and public hearings are scheduled for July 7. A final decision may come later this summer.
Trade experts question the legal basis
The proposal has already sparked controversy among trade experts.
GTRI claims the investigation extends the traditional scope of Section 301, which has historically been used to address market access barriers affecting U.S. companies rather than state policies governing what they import.
According to the think tank, India can claim that the United States is trying to impose its preferred framework for import control on other countries through unilateral trade measures. She also noted that concerns about forced labor are often product-specific and may not justify broad, country-level tariff measures.
This comes after Trump’s tit-for-tat threat of tariffs
The latest proposal comes just months after Trump sparked a broader trade dispute by announcing tit-for-tat tariffs on imports from dozens of countries, including India.
The Trump administration said that many trading partners imposed much higher tariffs on American goods than the United States imposed on their own goods. As part of this initiative, India faced a proposed reciprocal tariff of 26% on several exports to the United States.
This announcement raised concerns among Indian exporters, especially since the United States is India’s largest export destination and one of its most important trading partners.
However, the administration later suspended country-specific reciprocal tariffs for 90 days to give trading partners a chance to negotiate with Washington. India was among the countries that entered into discussions with the United States during this period.
Since then, officials from both countries have held several rounds of negotiations with the aim of finalizing the first phase of the bilateral trade agreement. The talks focused on tariffs, agriculture, industrial goods, digital trade, market access and non-tariff barriers.
The latest action by the US Trade Representative is separate from Trump’s reciprocal tariffs initiative. However, it represents a new tariff threat at a time when the two sides are trying to deepen economic ties and conclude a trade agreement.
What will happen next?
The proposed duties are not automatic and will only come into force if approved after the consultation process.
The USTR will review comments from governments, businesses, and other stakeholders before making a final decision.
If implemented, the tariffs could create new challenges for Indian exporters and add another point of friction to the ongoing trade negotiations between India and the United States. This episode also highlights Washington’s increasing focus on labor standards and supply chain rules as trade policy tools, broadening the range of issues that could impact market access in the world’s largest economy.
